Study Notes on design and implementation of strategy - Constituents of Strategy implementation, Administrative Aspects of Strategy Implementation, Matching Organization Structure to Strategy, The Strategy-Related Pros and Cons of Alternative Organization Forms Aligning culture and strategy: Impact of Organizational Culture on Strategy Implementation Aligning resources and capabilities with strategy

Strategy Implementation

Just being able to conceits bold new strategies is not enough. The general manager must also be able to translate his or her strategic vision into concrete steps that "get things done”

Strategy formulation entails heavy doses of vision, analysis, and entrepreneurial judgment, successful strategy implementa­tion depends on the skills of working through others, organiz­ing, motivating, culture-building, and creating stronger fits be-teen strategy and how the organization operates Ingrained behavior does not change just because a new strategy has been announced. Practitioners emphatically state that it is a whole lot easier to develop a sound strategic plan than it is to make it happen.

Constituents of Strategy implementation

What makes the job of the strategy manager so complicated when it comes to implementation is the number of tasks involved and the variety of ways to approach each task. Strategy implementation has to be tailored to the organization's overall condition and selling, to the nature of the strategy and the amount of strategic change involved and to the manager's own skills, style, and methods.

Four broad areas stand out:

1. Performing the recurring administrative tasks associated with strategy implemen­tation.

2. Creating "fits" between strategy and the various internal "ways of doing things" in order to align the whole organization behind strategy accomplishment.

3   Figuring out an agenda and a set of action priorities that matches¹ up well with the organization's overall situation and the context of the- sluing in which imple­mentation must take place.

4.  What managerial approach and leadership style to adopt in inducing the needed organizational changes.

The strategy implementers’ challenge in performing these tasks is to bring the organization's conduct of internal operations into good alignment with strategy and to unite the total organization- behind strategy accomplishment. The implemented job is one of building such enthusiasm and commitment up and down the ranks that a virtual organization wide crusade emerges to carry out the chosen strategy.

Strategy-supportive matches are needed with organizational skills and capabilities, functional area activities, organization structure, reward systems, and incentives, policies and procedures, information systems and control mechanisms, budgets and programs, and shared values and cultural norms.

 Administrative Aspects of Strategy Implementation

The Manager's role in the implementation process is to lead and keynote the tone, pace, and style of strategy imple­mentation. There are many ways to proceed. A strategy implementer can opt for an active, visible role or a low-key, behind the scenes role. He or she can elect to make decisions authoritatively or on the basis of consensus, to delegate much or little, to be deeply involved in the details of implementation or to remain aloof from the day-to-day problems. It is up to the strategy implementer to decide whether to proceed swiftly (launching implementation initiatives on many fronts) or lo move deliberately, content with gradual progress over a long period.    

To some extent, therefore, each strategy implementation situation is unique enough or require the strategy manager to tailor his or her action agenda to fit the specific organizational environment at hand- This forces the manager to be conscious of all that strategy implementation involves and to diagnose carefully the action priorities and in what sequence things need to be done. The manager's role is thus all-important His or her agenda for action and conclusions about how hard and how fast to push for change are decisive in shaping the character of implementation and moving the process along.

Successful strategy execution depends greatly on good internal organization, resources, healthy work culture and com­petent personnel. Building a capable organization is thus always a top strategy imple­mentation priority. Some of the organizational issues that stand out as dominant:

·       Developing an internal organization structure that is responsive to the needs of the people of the organisation.

·       Keeping a tune with the culture of the organisation that is aligning strategy with corporate culture and competencies.

·       Developing the skills and distinctive competences in which the strategy grounded and seeing that the organization has the managerial talents, technical expertise, and competitive capabilities it needs.

·       Keeping a match among the resources and routine activities that can be easily incorporated with the strategy.

·       Selecting people for key positions.

Matching Organization Structure to Strategy

The following five-sequence procedure serves as a useful guide for fitting structure to strategy:

·       Pinpoint the key functions and tasks requisite for successful strategy execution

·       Reflect on how the strategy-critical functions and organizational units relate to those that are routine and to those that provide staff support-

·       Make strategy-critical business units and functions the main organizational build­ing blocks.

·       Determine the degrees of authority needed to manage each organizational unit, bearing in mind both the benefits and costs of decentralized decision making.

·       Provide for coordination among the various organizational units.

1.Pinpoint the key functions and tasks requisite for successful strategy execution

 In any organization, some activ­ities and skills are always more critical to strategic success than others are. The strategy-critical activities vary according to the particulars of a firm's strategy and competitive requirements. To help identify what an organization's strategy-critical activities are, two questions can usefully be posed:

"What functions have to be performed extra well and on time for the strategy to succeed? and

 "In what areas bad performance would seriously endanger strategic success?

The answers to these two questions should point squarely at what activities and skills are crucial and where to concentrate organization-building efforts.

2. Understanding the Relationships among Activities

Activities can be re­lated by the flow of material through the production process, the type of customer served, the distribution channels used, the technical skills and know-how needed to perform them, a strong need to centralized authority over them, the sequence in which tasks must be performed, and geographic location, to mention some of the most obvious ways. Such relationships are important because one (or more) of the interrela­tionships usually become the basis for grouping activities into organizational units. If the needs of strategy are to drive organization design, then the relationships to look for are those that link one piece of the strategy to another.

3. Grouping Activities into Organization Units

If activities crucial to strategic success are to get the attention and visibility they merit, then they have to be a prominent part of the organizational scheme.

When key functions and critical tasks take a backseat to less important activities, the politics of organizational budget making usually leads to them being given fewer resources and accorded less significance than they actually have. On the other hand, when they form the core of the whole organization structure, their role and power in the overall scheme of things is highlighted and institutionalized. Senior managers can seldom give a stronger signal as to what is strategically important than by making key function and critical skills the most prominent organizational building blocks and, further, assigning them a high position in the organizational pecking order.

4.Determining the Degree of Authority and independence to be given to Each Unit

Activities and organizational units with a key role in strategy execution should not made subordinate to routine and non-key activities. Revenue-producing and results-producing activities should not made subordinate to internal support or staff functions. With few exceptions, decisions should delegate to those managers closest to the scene of the action. Corporate-level authority over operating decisions at the business-unit level and below should hold to a minimum. The crucial administrative skill is selecting strong managers to head up each unit and delegating them enough authority to formulate and execute an appropriate strategy for their unit.

5.Providing for Coordination among the Units

Providing for coordination of the activities of organizational units is accomplished mainly through positioning them in the hierarchy of authority. Managers higher up in the pecking order generally have authority over more organizational units and thus the power to coordinate, inte­grate, and otherwise arrange for the cooperation of the units under their supervision. The chief executive officer, to chief operating officer, and business-level managers are_, of course central points of coordination because they have broad authority. Besides positioning organizational units along the vertical scale of managerial author­ity, coordination of strategic efforts can also achieved through informal meetings, project teams, special task forces, standing committees, formal strategy reviews, and annual strategic planning and budgeting cycles. Additionally, the formulation of the strategic plan itself serves a coordinating role; the whole process of negotiating and deciding on the objectives and strategies of each organizational unit and making sure that related activities mesh suitably help coordinate operations, across organizational units.

Structure Evolves as Strategy Evolves: The Stages Model

Four distinct stages of strategy-related organization structure have singled out:

Stage I  organizations, are small, single-business enterprises managed by one person. The owner-entrepreneur has close daily contact with employees and each phase of operations. Most employees report directly to the owner, who mates all the pertinent decisions regarding mission, objectives, strategy, and daily operations.

Stage II organizations differ from Stage I enterprises in one essential aspect: an increased scale and scope of operations force a transition from one-person management to group management.

Stage III consists of organization whose operations, though concen­trated in a single field or product line, are scattered over a wide geographical area and large enough to justify having geographically decentralized operating units. These units all report to corporate headquarters and conform to corporate policies, but they are given the flexibility to tailor their unit's strategic plan to meet the specific needs of each respective geographic area. Ordinarily, each of the geographic operating units Of a Stage III Organization is structured along functional lines.

The key difference between Stage II and Stage III, however, is that while the functional units of a Stage II organization stand or fall together (in that they are built around one business and one end market), the geographic operating units of a Stage III firm can stand alone (or nearly so) in the sense that the operations in each geographic unit are not dependent on those in other areas. Typical firms in this category are breweries, cement companies, and steel mills having production capacity and sales organizations m several geographically separate market areas.

Stage IV includes large, diversified firms decentralized by line of business. Typically, each separate business unit is headed by a general manager who has profit-and-loss responsibility and whose authority extends across all of the unit's functional areas except, perhaps, accounting and capital investment (both of which are traditionally subject to corporate approval). Both business strategy decisions and operating decisions are concentrated at the line-of-business level rather than at the corporate level

The Strategy-Related Pros and Cons of Alternative Organization Forms

There are essentially five strategy-related approaches to organization:

(1) Functional specialization,

 (2) Geographic organization,

(3) Decentralized business divisions,

(4) Strategic business units, and

(5) Matrix structures featuring dual lines of authority and strategic priority.

1.The Functional Organization Structure

Generally speaking- organizing by functional specialties promotes full utilization of the most up-to-date technical skills and helps a business capitalize on the efficiency gains result­ing from use of [hose technical skills; it also helps a business capitalize on the efficiency gains resulting from the use of specialized manpower, faculties, and equipment. These are strategically important considerations for single-business organizations, dominant-product enterprises, and vertically integrated firms, and account for why they usually have some kind of centralized, functionally specialized structure.

2. Geographic Forms of Organization

Used by large-scale enterprises whose strategies need to be tailored to fit the particular needs and features of different geographical areas. In the private sector, a territorial structure is typically utilized by chain store retailers, power companies, cement firms, and dairy products enterprises. In the public sector, such organizations as the Internal Revenue Service, the Social Security Admin­istration, the Indian Postal Service, the state troopers, have adopted territorial structures in order to be directly accessible to geographi­cally dispersed clients.

3. Decentralized Business Units

Grouping activities along business and prod­uct lines has been a clear-cut trend among diversified enterprises for the past half-century, beginning with the pioneering efforts of Du Pont and General Motors in the 1920s. Separate business/product divisions emerged because diversification made a functionally specialized manager's job incredibly complex. Strategy implementation is facilitated by grouping key activities belonging to the same business under one organizational roof, thereby creating line-of-business units (which then can be subdivided into whatever functional subunits suit the key activities/ critical tasks makeup of the business}. The outcome is not only a structure, which fits strategy, but also a structure that makes the jobs of managers more doable. The creation of separate business units is then accomplished by decentralizing authority over the unit to the business-level manager. The approach, very simply, is to put entrepreneurial general managers in charge of the business unit, giving them enough authority to formulate and implement the business Strategy chat they deem appropriate, motivating them with incentives, and then holding than accountable for the results they produce. However, when a strong strategic fit exists across related business units, it can be tough to get autonomy-conscious business-unit managers to cooperate in coordinating and snaring related activities. They are prone to argue long and hard about "turf" and about held accountable for activities not totally under their control.

4. Strategic Business Units

A strategic business unit (SBU) is a grouping of business units based on some important strategic elements common to each; the possible elements of relatedness include an overlapping set of competitors, a closely related strategic mission, a common need to compete globally, an ability to accomplish integrated strategic planning, com­mon key success factors, and technologically related growth opportunities.

5. Matrix Forms of Organization

A matrix organization is a structure with two for more) channels of command, two lines of budget authority, and two sources of performance and reward. The key feature of the matrix is that product (or business) and functional lines of authority are overlaid (to form a matrix or grid), and managerial authority over the activities in each unit/cell of the matrix is shared between the product manager and functional manager.

Selecting People for Key Positions

Assembling a capable management team is an obvious part of the strategy implementa­tion task. The recurring administrative issues here center on what kind of core management team is needed to carry out the strategy and finding the people to fill each slot. Sometimes the existing management team is suitable and sometimes the core executive group needs to strengthened and/or expanded, either by promoting qualified people from within or by bringing in skilled managerial talent from the outside to help infuse fresh ideas and fresh approaches into the organization's manage­ment. In turnaround situations, in rapid-growth situations, and in those cases, where the right kinds of managerial experience and skills are not present in-house, recruiting outsiders to fill key management slots is a standard part of the organization-building process.

Aligning culture and strategy:  Impact of Organizational Culture on Strategy Implementation

Organizational culture includes the shared beliefs, norms and values within an organization. It sets the foundation for strategy. For a strategy within an organization to develop and be implemented successfully, it must fully align with the organizational culture. Thus, initiatives and goals must be established within an organization to support and establish an organizational culture that embraces the organization’s strategy over time.

Flexibility and Adaptability

Organizations that remain flexible are more likely to embrace change and create an environment that remains open to production and communication. This provides a model that welcomes cultural diversity and helps clarify strategy implementation. Culture within an organization can serve many purposes, including unifying members within an organization and help create a set of common norms or rules within an organization that employees follow.

Characteristics of Stability

A stable culture, one that will systematically support strategy implementation, is one that fosters a culture of partnership, unity, teamwork and cooperation among employees. This type of corporate culture will enhance commitment among employees and focus on productivity within the organization rather than resistance to rules and regulations or external factors that prohibit success.

Goal Unification

Flexible, strong and unified cultures will approach strategy implementation and affect implementation in a positive manner by aligning goals. Goals can come into alignment when the organizational culture works to focus on productivity and getting the organization’s primary mission accomplished. This may include getting products delivered to customers on time, shipping out more products than the organization’s chief competitor or similar goals. This will create a domino effect in the organization that ensures that all work performed by each individual in the company and work group focuses on performance and on the strategic importance of the company. This allows culture to align with strategy implementation at the most basic level. For this level of unification to work, goal setting must align with and be supported by systems, policies, procedures and processes within the organization, thereby helping to achieve strategy implementation and continuing the cultural integrity of the organization.

Process Implementation

Part of cultural alignment and strategy implementation involves process implementation. Processes include utilizing technology to facilitate goal attainment and the results a company is looking for when working with customers to meet their needs. While most of the time the hard problems and needs of an organization get met, the culture becomes neglected in the process. That is where processes come into place and strategy implementation gradually comes into existence to uphold and maintain organizational culture and strategies.

Cultural Alignment

When culture aligns with strategy implementation, an organization is able to more efficiently operate in the global marketplace. Culture allows organizational leaders to work both individually and as teams to develop strategic initiatives within the organization. These may include building new partnerships and re-establishing old ones to continue delivering the best possible products and services to a global market.

Aligning resources and capabilities with strategy

In appraising resources and capabilities to guide strategy formulation there are four key steps. Firstly, the key resources and capabilities have to be identified. Next they have to be appraised both for their strategic importance, and then for their comparative strength in relation to competitors. Finally, strategic implications — how these capabilities can drive value — have to be developed.

1.Identifying Key Resources and Capabilities

The first step is to identify the firm’s key resources and capabilities, and this should be done both from the client end (what the clients need) and the firm’s supply end (what the firm offers). It helps to thoroughly identify, analyze and appraise key resources and capabilities. This work should include an overall look at the practice, some investigation of client needs, industry and sector analysis, financial analysis, market intelligence, partner interviews and practice-group discussions.

2. Assessing the Strategic Importance of The Firm’s Resources and Capabilities

The principle here is to assess how vital (or unimportant) it is for the firm or a department to have certain capabilities in order to successfully pursue their strategic objectives. The true test of strategic importance is to assess the extent to which the resources and capabilities of the firm actually give the firm a sustainable competitive advantage against its rivals.

3.  Relative Strength

Resources and capabilities need to be assessed for relative strength compared with those firms identified as competitors. A thorough competitor analysis — considering the likely strategies of competitors, their overall objectives, their resources and capabilities, their positioning in their markets, their specialist strengths, the sorts of clients and sectors they serve, their pricing, service levels and profitability — all helps to establish ways in which the firm can successfully compete. In its review of comparative strength of resources and capabilities, the firm should also look out for stagnating capabilities and declining competitiveness. Where relevant, benchmarking and other analytical methods should be used to move from subjective to objective analysis.

4.Bringing It All Together

How does the firm exploit its key strengths more effectively and what should the firm do about its vulnerabilities either to correct them or reduce the firm’s exposure to them? The next step, therefore, is to develop some strategic implications so as to exploit strengths more effectively and so as to address weaknesses by correction development, outsourcing or acquisition of further resources.

Organization and Strategy at Millennium (A) HBS CAse Study solution - Core issues related to Millennium, Root cause/s of the problem in Millennium, Probable solutions based on the root cause to solve the problems of Millennium

 HBS CASE - Organization and Strategy at Millennium (A)

As  Deborah  Dunsire,  M.D.  returned  home  from  her  January  2005  interviews  at  Millennium Pharmaceuticals (Millennium), she ran through her assessment of the challenges she would face at  the Cambridge, Massachusetts-based biopharmaceutical firm. As a potential successor to founding CEO Mark Levin, Dunsire’s first priority was to bring Millennium to profitability. To succeed, she knew   that   she   would  need  to  rapidly   establish  a   productive   relationship   with Millennium’s management team. Among other things, the team would need to reevaluate the number of disease classes Millennium could feasibly tackle and to determine how the firm should allocate its limited resources  across  the  value  chain  activities  of  early-stage  discovery  research,  later-stage      drug development and final product commercialization. Dunsire would present her initial plans for Millennium to the board on Monday morning. Sitting in her living room, she pulled out a legal pad and began to jot down her thoughts.................

Millennium

Core issues related to the case:

v To establish a formal set up in the organisation and a productive relationship with Millennium’s management team while maintaining its entrepreneurial vision and culture.

v To bring Millennium back to profitability by moving it from its R&D roots to a more commercially-focused platform.

v To regain credibility with the investment community.

v To reallocate the resources of Millennium between its commercial and R&D platforms.

v To optimize current commercial opportunities without jeopardizing future product development.

v Informal review process and compensation system.

v Lack of employees in commercial wing of Millennium.

v Ignorance of competition faced by the company with regard to its products.

v Failure due to marketing philosophy of Millennium.

v Losses due to failure of some alliances.

v Lack of competent employees at executive level mainly in R&D.

Analysis of data for the root cause/s of the problem

Millennium’s organizational structure and processes had always been more informal than those of larger companies. It was organized around its people.  Employees relied on informal committees and ad-hoc systems throughout the firm to help guide the business and coordinate operations. A lot of people resisted or resented the change in culture when Levin began to professionalize executive meetings when Millennium prepared to launch Velcade commercially and to restructure its business. There was Frustration among employees due to informal review process and biasness in terms of deciding over compensation policy.

Over time some disadvantages of the alliances began to manifest themselves. Failure occurred in acquisition of CORE by Millennium. Huge cost incurred in restructuring process in 2003. Millennium fails to consider the competition Integrilin faced in the market. Marketing philosophy of Millennium that markets were won through good science and clinical data so products based on good data would sell them itself posed a problem. Less number of employees in commercial team of Millennium and also they were not experts in what they were selling in the market.

Partnership revenues were falling, due to the shift in business model from an R&D services organization to a fully-integrated company focused on its own pipeline, and raising significant amounts of additional outside capital was unlikely following the 2001 burst of the technology bubble and subsequently weak capital markets. Millennium booked $191 million in restructuring charges and the company booked a net loss of $590 million in 2002 $484 million in 2003. Millennium’s management believed that markets were won through good science and clinical data so products based on good data would sell themselves. This philosophy left little room for a marketer to express his or her opinions on competing in the marketplace through education and promotion.

Millennium’s commercial team was relatively small. The Velcade sales team detailed to oncologists with a vast majority working from their own private practices or in out-patient units of hospitals. The Integrilin team detailed to cardiologists and purchasing groups in hospitals with critical care facilities for percutaneous infusions. Both therapeutic areas required keen understanding of the clinical trial results of their respective products and those of their competitors. It was unrealistic to require a sales Representative to master the material of both products. Complicating these differences was that both products faced intense competition and required significant investment to remain competitive. It was difficult to imagine diluting the focus of a commercial rep by leveraging him or her to work on both products.

 Probable solutions based on the root cause to solve the problems:

The company should increase the number of experienced sales representatives in its commercial departments to cope up with the competition prevailing in the market. Instead of filling vacant positions at senior levels in R&D and commercial departments, Dunsire should go for internal recruitment as existing employees better understand the organisation and they can optimize the resources at the maximum possible to maintain a sound equilibrium between R & D and commercial segment. The company should also facilitate intense training to the existing and new employees in commercial segment. Employees should be given autonomy in performing their task, organizing adhoc meetings in order to maintain the culture of entrepreneurship but a continuous performance management system should be implemented in the organisation to decide over the compensation, promotion and other benefits to be provided to the employees. The company should prepare an intense marketing strategy with an objective is to become market leader in the products they deal in at the minimum time possible. Investors will show confidence in the company only it starts generating huge revenue from both of its segments commercial as well as R &D. The company should decide over its R&D products and reduce its cost of research spend at the minimum possible in order to increase the profitability of the company.